I know it sounds ridiculous that the EV-only startup Tesla could sell more vehicles than giants like Ford, Toyota, and Chevrolet as soon as next year with only 6 models, but hear me out.
Note that I am speculating this could happen without including any sales of Tesla’s next-generation vehicle, which may be available next year. Once that next-generation, smaller platform vehicle — which I expect to be available for $12,500 — ramps up (by 2026), I expect Tesla’s US sales to be double its nearest rival, or about a million a quarter. But that is the subject for another day (after the March 1st investor’s day).
I’m expecting Tesla’s vehicle sales to triple their estimated 140,000 units last quarter to 420,000 units (there is that number again — I swear I didn’t force it) by the fourth quarter of 2024. This is a growth rate of 73% a year, which I realize is higher than Tesla’s long-term 50% target. But the Inflation Reduction Act has huge subsidies in it, and it is now clear Tesla has a plan to take advantage of them to the fullest extent possible. There was some doubt before today whether Tesla would price its vehicles low enough to qualify for the subsidies, but all doubts of that vanished after today’s shocking across-the-board price cuts. In addition, there are huge subsidies for producing batteries in the US that Tesla plans to capture.
We have heard many times that a recession is when disruption happens. Buckle up while I weave a plausible story where Tesla’s sales could triple to 420,000 a quarter and the top legacy auto sellers could drop 20%, cutting Ford, Toyota, and Chevrolet to under 370,000 a quarter.
Forecast For Tesla Sales
The 6 models that Tesla will be selling in 2024:
Tesla Semi. Now, I don’t expect the semi to sell many units. Although, looking at what we have written about the Semi, we do expect it to change everything! Tesla plans to make 50,000 Semis by next year, but how will that ramp? I think we can expect that it will be slow in 2023 and accelerate in 2024. So, it might be a couple thousand in 2023 and 48,000 in 2024. But does that mean Tesla will be making 12,000 each quarter in 2024? No, that isn’t how the ramp works — Tesla will probably start the year making 3,000 a quarter and end the year making 20,000 a quarter. That would put Tesla at an annual run rate of 80,000 Semis a year, which happens to be about the same sales as Freighlighter, the leader in Class 8 (semi) sales in the US.
Model S & X are pretty easy to estimate. In its recent press release, Tesla reported sales of over 20,000 Model S and X vehicles (all in the US) in 2022. I expect with aggressive pricing, the company may be able to increase its sales of its premium duo a modest 10% a year to reach 24,000 a quarter by the fourth quarter of 2024.
The Model 3 & Model Y had about 120,000 sales in the US in the 4th quarter using GoodCarBadCar.com estimates above. That is taking the 140,000 figure above and subtracting the 20,000 Model S and X sales. The best selling crossover was the Toyota RAV4 at about 97,000 sales, while the best selling car was the Toyota Camry at about 81,000 sales. As I discussed in this recent article, by the end of next year, Tesla will be in a position to sell both the Model 3 and Y for under $30,000 to people eligible for the $7,500 US tax credit for ZEVs. The cheapest Tesla Model Y cost $65,990 for most of the 4th quarter of last year and the cheapest Model 3 was $46,990. But then are the reductions in starting prices (trims are not identical, since I’m assuming a standard range RWD Model Y to be announced) of 54% for the Model Y and 36% for the Model 3! Let’s compare that to Toyota’s prices, where the cheapest Camry is over $26,000 and the cheapest RAV4 starts at about $28,000. Toyota doesn’t have the margin to reduce the prices of their cars, and they don’t know how to make them much cheaper. The learning curve on making gas vehicles doesn’t make significant advances anymore. I think it is reasonable with all the advantages of a Tesla (style, environmental, fuel costs, maintenance, depreciation, safety, performance, etc.) over a Toyota that if Toyota could sell 178,000 of those two models in the 4th quarter of last year, Tesla could sell 55% more than that (or 276,000) of its very popular Model Y and Model 3 in the 4th quarter of 2024, assuming they are available close to $30,000. Can Tesla make that many vehicles in Austin and Fremont? Don’t bet against Tom Zhu.
The Cybertruck is going to really shake up its market, just like every Tesla model has done. I’m betting that if Ford can sell about 187,000 F-Series vehicles in the last quarter, Tesla will be able to sell 100,000 Cybertrucks. With Tesla estimated to have between a million and 3 million reservations for the Cybertruck, demand should not be an issue, but will Tesla be able to ramp up production? I’m betting that Tom Zhu, the man credited with the incredible Shanghai Gigafactory ramp over the last few years, will be able to work the same magic in Austin. We shall see!
High-Level Forecast for Ford, Toyota, and Chevrolet
This article isn’t about legacy auto, but if we have an auto crisis as Elon Musk discussed in this article, it will clearly be a tough environment for overall sales.
- Ford’s top sellers — the F-Series pickup and the Explorer SUV — will be hurt by the rising sales of the Cybertruck and Model Y, respectively. I don’t think Ford can afford to ramp up production of the Mustang Mach-E at prices competitive with the Model Y, since their costs are likely much higher. Likewise, we recently wrote about the disappointing production goals for the truck. On the other hand, you will hate me for saying it, but the Escape Plug-In Hybrid with the tax credit should be about $30,000 and a hot seller if Ford can ramp up production. Overall, I think Ford will be thrilled if they can keep the sales decline to only 10% a year, or 20% over 2 years, to about 370,000 a quarter.
- Toyota’s top sellers — the RAV4, Camry, and Tacoma — will be severely affected by the rise of the Model Y, Model 3, and Cybertruck, respectively. It is very possible they lose more than 10% of their sales, but if Toyota works hard to move production of its plug-in hybrids, like the Prius Prime and RAV4, to the US to be able to access US tax credits, they might be able to keep their sales decline to 10% a year, or 20% over 2 years.
- Chevrolet’s top sellers — the Silverado Pickup and the Equinox SUV — will likewise be hurt by the Cybertruck and Model Y, respectively. Chevrolet always talks a big game, but it actually is selling a lot of Bolts, and let’s give the brand the benefit of the doubt and say it only lose 5% a year for the next 2 years, and thus also end up about about 370,000 a quarter in the 4th quarter of 2024.
Well, I did play with the bottoms-up numbers a bit, but 20,000 Semis, 24,000 premium cars, 276,000 mass-market cars, and 100,000 Cybertrucks would add up to 420,000 deliveries in the US in the 4th quarter of 2024, and I laid out some brief reasons why Ford, Toyota, and Chevrolet might only sell 370,000 vehicles in the same quarter. So, if all that comes to pass, not only will Tesla be the top seller of vehicles in that quarter — it will achieve that with a 50,000-vehicle margin, or over 13%!
Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], and Hertz [HTZ]. But I offer no investment advice of any sort here.
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